Only 39 percent of rural loan is disbursed directly by banks while the rest is disbursed by NGOs and others at an interest rate between 25-120 percent, which does not give quality access to credit.
The observation came from Md Ali Hossain Prodhania, managing director of Bangladesh Krishi Bank, who was addressing a seminar organised by Bangladesh Institute of Bank Management (BIBM) on Wednesday.
“Unless the loan disbursement coverage is expanded with new entrepreneurs, it will not be possible to achieve the Sustainable Development Goals” he added.
BIBM Associate Professor Mohammed Sohail Mustafa presented a research paper titled “Impact of Bank Based Rural and Urban Financing on Economic Growth of Bangladesh” at the programme.
Lower rate of nonperforming loan has contributed to a gradual rise in the bank-based rural financing in the last eight years, according to the BIBM study.
Speakers at the event acknowledged the satisfactory positive impact of bank-based rural and urban finance on the country’s economic growth, although it has had no or reverse impact in many countries.
“In developing countries like Bangladesh, positive impact is expected, we need to see how much effective this impact is. Surveillance in qualitative access to loan is as important as in the quantitative side.” said SM Moniruzzama, chairman of BIBM Executive Committee and deputy governor of Bangladesh Bank, in his inaugural speech as chief guest.
“Provide credit to the new rather than lending consecutively to the same recipients,” he added.
According to the BIBM study, banks and non-bank financial institutions may come out of the culture of providing loans to conventional borrowers, who are involved in producing traditional products or services.
It is high time to encourage innovative entrepreneurs in both rural and urban areas.
BIBM Director General Md Nazimuddin said the study will help the central bank in taking future actions.
Supernumerary Professor of BIBM Barkat-e-khudha, Former Managing Director of Pubali Bank Limited Helal Ahmed Chowdhury, and Professor of Dhaka University Dr Mahfuzul Hoque spoke, among others, on the occasion.